When it comes to Property Finance, it is important that you make the right choices, and that includes taking steps toward improving your credit score in order to qualify for lower interest and even getting your property loan approved faster. The following suggestions are some of the best possible ways to get the most out of your property finance;
Make a Substantial Down-Payment
The best way to get the best interest rates on property finance is to make a sizeable down payment. In most cases, a sizeable down payment will lower your interest rates in the long run and therefore you will pay back much less in total, particularly on the interest.
As a minimum, the lender may expect a down payment of 20% on the value of the property, but you will likely get a much lower interest rate if you make a higher down payment than the minimum.
Consider a Fixed Rate Mortgage Over a Variable Mortgage
Most property loans will come with either a fixed rate or a variable rate of interest. When you choose a fixed rate mortgage, you will be able to lock into a fixed interest rate throughout the duration of the loan. With variable or adjustable interest rates, your interest rates may go up or down over time and that could hurt your property financing plans. While variable interest rates may be low at the beginning, they can go up significantly over the years, so make sure you understand the terms of variable interest rates because it will affect your monthly payments.
Buy the Property as an Owner-Occupant
Purchasing a property as the primary resident and then residing there as an owner-occupant is one of the best ways to make the most out of your property finance. Banks will ask for lower down payments on an owner-occupant loan than they would impose on an investor loan. While investor property finance may attract 20% down payments, an owner-occupant arrangement usually attracts between a 3.5% and 5% down payment. In most cases, you will qualify for a much lower interest as well as an owner-occupant of a property.
Lenders will expect you to reside in a property for a specific period of time as an owner-occupant. You can rent the property out for income generation once you have lived in it past that period of time.
Choose a Property Lease with an Option to Buy
This is one of the best long-term opportunities that can get you the most out of your property finance. This is a special type of seller-financing that can help first-time property buyers to make the most of property finance.
Under this option, you will be able to rent a property for a period of 2-3 years before applying for property finance. One of the benefits of this arrangement is that it gives you plenty of time to secure property financing and to improve your property score just before buying. In some cases, you may even apply to use part, or all, of the rental payments that have been made to be put towards the balancing of the home.
Watch Out for Distress Sales
Home prices sometimes fluctuate, even if they are still on the rise in most markets in the UK. However, you can still strike great bargains in many areas. Most of the best property deals will come in the form of distress sales such as foreclosures. With a property under foreclosure, you will be able to negotiate a better deal since the property finance lenders are in a hurry to get the property off the market. You should consider checking out pre-foreclosure properties to see what you can find.
When you purchase a property in distress, you will often have an offer accepted for a price lesser than the property’s market value, which means you can make lower down payments and qualify for much lower interest rates on monthly payments.
Pay Down Your Current Debt
Most first-time property owners underestimate the influence of current debt on property finance. It is important that you consider your current debt-to-income ratio (DTI), this is one of the things your property financiers will consider in order to evaluate how capable you are of meeting your monthly payments. To get the real value of your DTI, simply divide your recurring monthly debt by your monthly income and that will show your DTI level in percentage.
A high DTI means your recurring debt to income level is very high and that can negatively impact on your chances of securing a good deal on your property loan. It can even be tougher to obtain a property loan from different sources. Try as much as possible to lower your DTI percentage by paying down more of your debt. The lower your DTI, the better the deals you can get on property finance.
Get an Investment Partner
Teaming up with an investment partner is another viable means of making the most from your property finance. The only downside of this arrangement is that you will also share the profits on a property. If you resell the property, you may also have to share the resale profits. In addition to splitting the interest rates and monthly payments though, you will also share the costs of running the property which is a financial relief on you especially if you have other financial obligations to meet. Having an investment partner is one sure way of getting the most out of property finance, especially for those who are not financially buoyant enough to meet with the financial demands of such loans.
Property investment is one of the easiest ways of owning a property, and at the same time, it can be very complex if you are unaware of the details of the refinancing. Regardless of the property financing options you choose, it is better to be prepared and to understand the terms and conditions of such loans, in order to avoid being trapped into long-term debt. Speak to a professional property finance consultant or a property lawyer for guidance before taking property finance.